IDEAS home Printed from https://ideas.repec.org/p/pri/cepsud/235.html

Working Capital, Trade and Macro Fluctuations

Author

Listed:
  • Se-Jik Kim

    (Seoul National University)

  • Hyun Song Shin

    (Princeton University)

Abstract

In addressing the precipitous drop in trade volumes in the recent crisis, the real and financial explanations have sometimes been juxtaposed as competing explanations. However, they can be reconciled by appeal to the time dimension of production and the working capital demands associated with offshoring and vertical specialization of production. We explore a model of manufacturing production chains with offshoring where firms choose their time profile of production and where inventories, accounts receivable, and productivity are procyclical and track financial conditions.

Suggested Citation

  • Se-Jik Kim & Hyun Song Shin, 2013. "Working Capital, Trade and Macro Fluctuations," Working Papers 1465, Princeton University, Department of Economics, Center for Economic Policy Studies..
    • Handle: RePEc:pri:cepsud:235
    as

    Download full text from publisher

    File URL: https://gceps.princeton.edu/wp-content/uploads/2017/01/235shin.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Alan S. Blinder, 1986. "Can the Production Smoothing Model of Inventory Behavior be Saved?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(3), pages 431-453.
    2. Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 52-102, February.
    3. Tobias Adrian & Paolo Colla & Hyun Song Shin, 2013. "Which Financial Frictions? Parsing the Evidence from the Financial Crisis of 2007 to 2009," NBER Macroeconomics Annual, University of Chicago Press, vol. 27(1), pages 159-214.
    4. George Alessandria & Joseph P. Kaboski & Virgiliu Midrigan, 2010. "The Great Trade Collapse of 2008-09: An Inventory Adjustment?," NBER Working Papers 16059, National Bureau of Economic Research, Inc.
    5. Tobias Adrian & Paolo Colla & Hyun Song Shin, 2011. "Which financial frictions? Parsing the evidence from the financial crisis of 2007-09," Staff Reports 528, Federal Reserve Bank of New York.
    6. Claudio Raddatz, 2010. "Credit Chains and Sectoral Comovement: Does the Use of Trade Credit Amplify Sectoral Shocks?," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 985-1003, November.
    7. Schwartzman, Felipe, 2014. "Time to produce and emerging market crises," Journal of Monetary Economics, Elsevier, vol. 68(C), pages 37-52.
    8. Robert E. Hall, 2010. "Why Does the Economy Fall to Pieces after a Financial Crisis?," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 3-20, Fall.
    9. Shin, Hyun Song, 2010. "Risk and Liquidity," OUP Catalogue, Oxford University Press, number 9780199546367.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David Rezza Baqaee & Emmanuel Farhi, 2019. "The Macroeconomic Impact of Microeconomic Shocks: Beyond Hulten's Theorem," Econometrica, Econometric Society, vol. 87(4), pages 1155-1203, July.
    2. Raoul Minetti & Pierluigi Murro & Zeno Rotondi & Susan Chun Zhu, 2019. "Financial Constraints, Firms’ Supply Chains, and Internationalization," Journal of the European Economic Association, European Economic Association, vol. 17(2), pages 327-375.
    3. Van Cauwenberge, Annelies & Vancauteren, Mark & Braekers, Roel & Vandemaele, Sigrid, 2019. "International trade, foreign direct investments, and firms’ systemic risk : Evidence from the Netherlands," Economic Modelling, Elsevier, vol. 81(C), pages 361-386.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:pri:cepsud:235shin is not listed on IDEAS
    2. Se-Jik Kim & Hyun Song Shin, 2013. "Working Capital, Trade and Macro Fluctuations," Working Papers 1465, Princeton University, Department of Economics, Center for Economic Policy Studies..
    3. Alyson C. Ma & Ari Van Assche, 2012. "Is East Asia's Economic Fate Chained to the West?," CIRANO Working Papers 2012s-11, CIRANO.
    4. Benjamin Bridgman, 2013. "International Supply Chains And The Volatility Of Trade," Economic Inquiry, Western Economic Association International, vol. 51(4), pages 2110-2124, October.
    5. Richard S. Grossman & Christopher M. Meissner, 2010. "International aspects of the Great Depression and the crisis of 2007: similarities, differences, and lessons," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 26(3), pages 318-338, Autumn.
    6. Chor, Davin & Manova, Kalina, 2012. "Off the cliff and back? Credit conditions and international trade during the global financial crisis," Journal of International Economics, Elsevier, vol. 87(1), pages 117-133.
    7. de Rougemont, P., 2011. "Inventories in the crisis," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 21, pages 42-72, Spring.
    8. Aymanns, Christoph & Farmer, J. Doyne, 2015. "The dynamics of the leverage cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 50(C), pages 155-179.
    9. André K. Anundsen & Karsten Gerdrup & Frank Hansen & Kasper Kragh‐Sørensen, 2016. "Bubbles and Crises: The Role of House Prices and Credit," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(7), pages 1291-1311, November.
    10. Meredith A. Crowley & Xi Luo, 2011. "Understanding the great trade collapse of 2008–09 and the subsequent trade recovery," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 35(Q II), pages 44-68.
    11. Aymanns, Christoph & Caccioli, Fabio & Farmer, J. Doyne & Tan, Vincent W.C., 2016. "Taming the Basel leverage cycle," Journal of Financial Stability, Elsevier, vol. 27(C), pages 263-277.
    12. Sarte, Pierre-Daniel & Schwartzman, Felipe & Lubik, Thomas A., 2015. "What inventory behavior tells us about how business cycles have changed," Journal of Monetary Economics, Elsevier, vol. 76(C), pages 264-283.
    13. Yang Jiao & Yi Wen, 2012. "Capital, finance, and trade collapse," Working Papers 2012-003, Federal Reserve Bank of St. Louis.
    14. Stijn Claessens & M Ayhan Kose, 2018. "Frontiers of macrofinancial linkages," BIS Papers, Bank for International Settlements, number 95, May.
    15. Zymek, Robert, 2015. "Factor proportions and the growth of world trade," Journal of International Economics, Elsevier, vol. 95(1), pages 42-53.
    16. Rudolfs Bems & Robert C Johnson & Kei-Mu Yi, 2010. "Demand Spillovers and the Collapse of Trade in the Global Recession," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 58(2), pages 295-326, December.
    17. Müller, Isabella, 2020. "Trade shocks, credit reallocation and the role of specialisation: Evidence from syndicated lending," IWH Discussion Papers 15/2020, Halle Institute for Economic Research (IWH).
    18. Alfred Duncan & Charles Nolan, 2017. "Financial Frictions in Macroeconomic Models," Studies in Economics 1719, School of Economics, University of Kent.
    19. Prema-chandra Athukorala & Archanun Kohpaiboon, 2010. "East Asia in World Trade: The Decoupling Fallacy, Crisis, and Policy Challenges," FIW Working Paper series 052, FIW.
    20. Valentina Aprigliano & Danilo Liberati, 2021. "Using Credit Variables to Date Business Cycle and to Estimate the Probabilities of Recession in Real Time," Manchester School, University of Manchester, vol. 89(S1), pages 76-96, September.
    21. Cherkashin, Ivan & Demidova, Svetlana & Kee, Hiau Looi & Krishna, Kala, 2015. "Firm heterogeneity and costly trade: A new estimation strategy and policy experiments," Journal of International Economics, Elsevier, vol. 96(1), pages 18-36.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • F20 - International Economics - - International Factor Movements and International Business - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pri:cepsud:235. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bobray Bordelon (email available below). General contact details of provider: https://edirc.repec.org/data/ceprius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.